The Bias of Conventional Risk Premiums in Empirical Tests of the Capital Asset Pricing Model

1982 ◽  
Vol 11 (2) ◽  
pp. 90 ◽  
Author(s):  
Patrick A. Casabona ◽  
Ashok Vora
Keyword(s):  
Asset Pricing ◽  
Capital Asset Pricing Model ◽  
Capital Asset Pricing ◽  
Pricing Model ◽  
Capital Asset ◽  
Risk Premiums ◽  
Asset Pricing Model ◽  
Empirical Tests

Empirical tests on the liquidity-adjusted capital asset pricing model

2015 ◽  
Vol 35 ◽  
pp. 73-89 ◽  
Author(s):  
Van Vu ◽  
Daniel Chai ◽  
Viet Do
Keyword(s):  
Asset Pricing ◽  
Capital Asset Pricing Model ◽  
Capital Asset Pricing ◽  
Pricing Model ◽  
Capital Asset ◽  
Asset Pricing Model ◽  
Empirical Tests

scholarly journals The Capital Asset Pricing Model: Theory and Evidence

2004 ◽  
Vol 18 (3) ◽  
pp. 25-46 ◽  
Author(s):  
Eugene F Fama ◽  
Kenneth R French
Keyword(s):  
Asset Pricing ◽  
Equity Capital ◽  
Capital Asset Pricing Model ◽  
Capital Asset Pricing ◽  
Pricing Model ◽  
Capital Asset ◽  
Expected Return ◽  
Asset Pricing Model ◽  
Market Portfolio ◽  
Empirical Tests

The capital asset pricing model (CAPM) of William Sharpe (1964) and John Lintner (1965) marks the birth of asset pricing theory (resulting in a Nobel Prize for Sharpe in 1990). Before their breakthrough, there were no asset pricing models built from first principles about the nature of tastes and investment opportunities and with clear testable predictions about risk and return. Four decades later, the CAPM is still widely used in applications, such as estimating the cost of equity capital for firms and evaluating the performance of managed portfolios. And it is the centerpiece, indeed often the only asset pricing model taught in MBA level investment courses. The attraction of the CAPM is its powerfully simple logic and intuitively pleasing predictions about how to measure risk and about the relation between expected return and risk. Unfortunately, perhaps because of its simplicity, the empirical record of the model is poor - poor enough to invalidate the way it is used in applications. The model's empirical problems may reflect true failings. (It is, after all, just a model.) But they may also be due to shortcomings of the empirical tests, most notably, poor proxies for the market portfolio of invested wealth, which plays a central role in the model's predictions. We argue, however, that if the market proxy problem invalidates tests of the model, it also invalidates most applications, which typically borrow the market proxies used in empirical tests. For perspective on the CAPM's predictions about risk and expected return, we begin with a brief summary of its logic. We then review the history of empirical work on the model and what it says about shortcomings of the CAPM that pose challenges to be explained by more complicated models.

scholarly journals Economic Premium Principles in Insurance and the Capital Asset Pricing Model

1987 ◽  
Vol 17 (2) ◽  
pp. 141-150 ◽  
Author(s):  
Heinz H. Müller
Keyword(s):  
Asset Pricing ◽  
Capital Market ◽  
Stock Exchange ◽  
Capital Asset Pricing Model ◽  
Capital Asset Pricing ◽  
Insurance Company ◽  
Pricing Model ◽  
Capital Asset ◽  
Risk Premiums ◽  
Asset Pricing Model

AbstractAn insurance company is considered as an intermediary between policyholders and the capital market. By applying the traditional and the generalized version of the capital asset pricing model, a class of premium principles can be derived. This class is fully compatible with Bühlmann's economic premium principle. Moreover, insurance premiums can be directly related to risk premiums on the stock exchange.

The Capital Asset Pricing Model and Market Microstructure

CFA Digest ◽  
1999 ◽  
Vol 29 (4) ◽  
pp. 96-96
Author(s):  
Frank T. Magiera
Keyword(s):  
Asset Pricing ◽  
Market Microstructure ◽  
Capital Asset Pricing Model ◽  
Capital Asset Pricing ◽  
Pricing Model ◽  
Capital Asset ◽  
Asset Pricing Model
Sign in / Sign up

Export Citation Format

Share Document